Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6600.
- Add a stop-loss at 0.6750.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6670 and a take-profit at 0.6750.
- Add a stop-loss at 0.6600.
The AUD/USD pair retreated below the 50-day moving average as the US dollar index (DXY) made a strong comeback ahead of the US inflation data. It crashed to a low of 0.6660, its lowest point since August 16.
US dollar rebound
The AUD/USD pair dropped sharply as the US dollar index bounced back. The dollar index jumped to $101.56, its highest point since September 4 and much higher than last week’s low of $100.8.
This price action happened as traders continued to react to last Friday’s nonfarm payrolls (NFP) data. According to the Bureau of Labor Statistics (BLS), the economy added 142k jobs in August while the unemployment rate fell to 4.2%.
The next key catalyst for the US dollar will be the upcoming US Consumer Price Index (CPI) data on Wednesday. Inflation is important data because it forms the second part of the Fed’s dua-mandate.
Top Forex Brokers
Economists expect that inflation will continue falling in August, with the headline figure falling to 2.6% and the core figure dropping to 3.0%. If these numbers are accurate, they will be the fourth consecutive month that inflation has moved downward.
The AUD/USD pair also dropped as most commodities continued falling, in a sign that the supercycle has ended. Iron ore, coal, and copper prices have dropped sharply in the past few months as the Chinese economic slowdown continued.
A report on Monday showed that China’s producer price index (PPI) fell by 1.8% in August. The headline Consumer Price Index (CPI) moved to 0.6% and 0.4% on a YoY and MoM basis, respectively.
AUD/USD technical analysis
The AUD/USD exchange rate peaked at 0.6820 last month and has been in a strong downtrend since then. That was an important level because it was along the double-top level. In price action analysis, this is one of the most popular bearish patterns in the market.
The pair has dropped below the 50-day Exponential Moving Average (EMA) while the two lines of the MACD have formed a bearish crossover. Also, the momentum indicator has continued to point downwards.
Therefore, the pair will likely continue falling as sellers target the next point at 0.6600. The stop-loss of this trade will be at 0.6750.
Ready to trade our free trading signals? We’ve made a list of the top forex brokers in Australia for you to check out.